Nationalisation, and the sale to a private consortium (1998)

A design that could not survive the fall in collateral values

Togo Shigeoki’s line — “all I can do is return it to you with the share price ten times higher” — reads less as an ambition than as a confession of debt to the institutions that had subscribed to the capital increase. By the time ¥290 billion had been raised, the only road left to the Nippon Credit Bank was to write off its bad loans within whatever time the market allowed, and that time ran out in seventeen months. There is nothing in the contemporary press that lets the responsibility be narrowed to one person; what appears again and again is the explanation that the design chosen in 1957 — to make up for a late start by lending against real-estate collateral — could not withstand a fall in the value of that collateral.

It is too early to say that reprivatisation saved this bank. Even after the private consortium took it on, the obligation to repay the ¥320 billion that had been injected remained, the loan book stayed shrunken, and what borrowers were left were heavily in property. When Maruyama Hiroshi said that “recovering the lost ground comes first,” that was, it appears, a candid expression of the fact that the content of the rescue was still blank. Even so, the framework itself — the state declining to carry the failure alone and preparing a private vehicle to receive it — survived as the template for the resolutions that followed.